A Tough Sell: SpectraWatt to Shut Down Solar Factory, Lay Offs

The fate of silicon solar cell maker SpectraWatt has always been a point of curiosity for me, not the least because the startup company is making the same type of cells that its much larger competitors can make and most likely can do for much cheaper. And it turns out that SpectraWatt has indeed been struggling.

The New York-based company plans to lay off 117 workers and close its factory, reported the Poughkeepsie Journal on Wednesday. The company blames the harsh winter that plagues much of Europe now for a lack of demand for its solar cells. Europe, the world’s largest solar market, is buried in snow now, making it difficult to build any solar power projects. But that doesn’t tell the whole story.

SpectraWatt has been trying to build a business during a difficult time. The company was an Intel (s INTC) spinoff based in Oregon, (a $50 million round in 2008), and other investors included Cogentrix Energy, PCG Clean Energy and Technology Fund, and Solon. But SpectraWatt tried to raise money for its first factory around the time when the financial market collapsed in 2008.

In early 2009, it announced a plan to move to New York to take advantage of some generous tax and other state and local incentives, which it said it would use to build a factory with an initial annual production capacity of 60 megawatts. In March this year, SpectraWatt said it had closed $41.4 million in convertible debt and began production. As those of you who understand solar manufacturing know, the start of production isn’t the same as running a manufacturing line at full speed. There is a lag time of typically 6-9 months during which the manufacturer has to troubleshoot technical problems with the new production equipment.

Besides the task of getting the production lines up and running smoothly, SpectraWatt also has to line up customers. The company hasn’t announced any, though that doesn’t mean it has none. But the startup is entering the market at a time when many other silicon solar cell makers, such as Trina Solar and JA Solar, already have hundreds of megawatts of factories. That type of manufacturing muscle can drive down costs significantly. And those are just the companies that make silicon cells. SpectraWatt also has to compete with companies that use different semiconductor materials but are still pursuing the same distributors and project developers like everyone else.

Market research firms do expect growth to slow down in 2011, but that is in comparison to the boom in 2010. Global demand for solar cells and panels grew 196 percent to hit 10.6 GW in the first 9 months of this year, according to Solarbuzz. The market research firm said the full year 2010 market will likely reach 16.3 GW. The market won’t grow as fast next year because of declines in government incentives in European countries such as Germany, France and Czech Republic. Solarbuzz is forecasting a 25 percent growth in the global market in 2011, and it expects market growth to come from mostly United States, Canada, Italy, China and India.

The president of the local chamber of commerce told the Poughkeepsie Journal that SpectraWatt’s factory closure is likely caused by a loss of a major customer. We’ve emailed SpectraWatt for comment about its future plans.

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Image courtesy of SpectraWatt.